Strategic investment fund

Publié le November 10, 2008

Speech by M. Nicolas Sarkozy, President of the Republic (excerpts)
Montrichard, November 20, 2008

Exactly three weeks ago, on Thursday, 30 October, I had said that in three weeks’ time I would give details regarding the operation of a new strategic investment fund in the French economy. It’s now Thursday, 20 November, the three weeks have passed and I present to you today the fund on the day and at the time I said I would. (…)

I wanted to present the fund here, in Montrichard, before the employees of a medium-size manufacturing company. I have done so because it is companies like these that we want to help and we want to use public money to assist companies and industries driving French growth.

If today the banks have serious difficulties in investing in companies which create wealth, innovation and new services, then we’ll do it. (…)

French businesses need confident investors, stable investors, not ones who come with a hidden agenda, i.e. to buy up businesses to transfer them elsewhere or come solely to make a short-term financial gain. They need investors interested in what the business will be worth in 5 or 10 years, not just in two months. French firms need equity to develop rather than leverage capital followed by asset stripping. (…)

This fund, whose creation I am announcing here, has two main objectives.

To support the development of small and medium-size businesses. Because, obviously, when you are a very large company, it’s easier to have your banker’s confidence than when you are an SME. In our country, for too long we’ve been in the habit of lending money to those who didn’t need it and a bit less to those who did. (…)

I have campaigned on work, rehabilitating work, rewarding for work, I want us to keep our factories in France. I want us to stop outsourcing and relocating jobs abroad and I want companies which have potential to develop to be able to do so even if the financial institutions, at the moment, are a bit fearful. Too many risks were taken yesterday and not enough today. The State is here [to do it], and of course, when the situation is better we’ll resell our stake, and if we make a profit, so much the better for the taxpayer.

That’s the fund’s first objective.

The fund’s other objective will be to increase protection for the capital of strategic companies. I’m going to be very frank with you. I don’t intend to be the president of the Republic who’s going to allow foreign funds to buy up firms which have lost their value only because the stock market has collapsed. (…)

These strategic companies are those which have skills, technology, jobs which are irreplaceable for France, this is moreover what we did with the Chantiers de l’Atlantique (1). I want us to go on building trains. In 2004, as finance minister, I rescued Alstom. Today we’re pretty glad that we’ve got Alstom! The State had bought up 20% of Alstom, it resold it making a profit, but had the State not done this, Alstom would have been no more. If we hadn’t come to the rescue of the Chantiers de l’Atlantique, we wouldn’t be building any more ships. I want France to go on being a country where we manufacture cars, build ships, trains and planes. Because a country which no longer has any industry is one which is ready to lose its services as well. So we have invested 30% in the Chantiers de l’Atlantique and when things are going better, we’ll resell it. But whereas it took decades to create the know-how of the Saint-Nazaire workers, it would take just a few months and a cash-flow crisis to lose them. Once they’re gone, you never get them back. (…)

To achieve this objective, there must be a degree of flexibility in the fund’s operation. (…)

I am setting two guidelines:

it must choose the right projects. And here things have to be clear. The fund’s aim isn’t to allow firms which aren’t viable to linger on and on. So that things are very clear, I take responsibility for this choice too. Do we understand each other? The aim isn’t to allow an entrepreneurial project with no future to go on for an extra two years. The aim is to help develop up-and-coming companies, not to save companies which haven’t got a future.

Second guideline, the fund must in principle (…) take a minority stake in the firms it’s investing in; this is very important. The purpose of the fund isn’t to set up an integrated industrial group, with the State taking over the management’s job. (…)

This fund is for the long term. We are guided by the quest for profit and industrial vision. It won’t act alone and we’ll be perfectly happy finding other partners, including foreign ones. There are perfectly respectable sovereign funds: European or other ones will be welcome. We can perfectly well work with others. We don’t have to act alone. (…)

The fund will provide all the necessary guarantees of transparency – how could it not do so, given that this is what we demanded at international level!

One essential issue remains – I know you are waiting to hear about this: the fund’s resources. Our objective is for the fund to manage €20 billion in 2009. This will be money directly serving the real economy. I think it’s a reasonable amount because it corresponds to the assets and liquidity mobilizable by the State and the Caisse des Dépôts (2). I can tell you that with €20 billion, our fund will be among the world’s 20 leading long-term investors. (…)

The fund’s shareholders, the Caisse des Depôts and the State will be able to provide it with liquidity of €6 billion so it will have a real capacity for action. This fund is in fact an anti-crisis weapon.

The rest of the fund’s assets, i.e. €14 billion, will be in the form of contributions from the Caisse des Dépots and the State. (…)

I’d like to say something else too. Faced with the crisis, there are two possible strategies: the one which the various political leaders have always adopted in past crises. You wait for it to go away, you don’t say much, you don’t do much apart from adopting an austerity plan. In fact, an austerity plan does nothing except depress a bit more an economic situation which is [already depressed] (…). There’s another strategy, the one I’m proposing to France: that we take advantage of the opportunity the crisis is giving us to speed up the changes in our country and make France emerge from the crisis stronger than when she entered it. Over the next few weeks we’ll be working on a plan to revitalize the French infrastructure we need so much in our country, on concretely applying the sustainable development concept, since maintaining the environmental equilibrium isn’t a risk for us but an opportunity. I believe in sustainable growth and particularly the developments in renewable energies. We’re going to invest even more in research, innovation, training and our universities. We’re not going to stand around like idiots in the face of the crisis. (…)./.